Homeownership is a worthwhile dream that most people, including the youth and individuals operating in the informal economy, like to realise easily and conveniently.
But this dream hardly comes through for many because house prices are unaffordable, while credit facilities, notably mortgages, are hard to come by. Mortgage, by its nature, focuses more on high-income earners and people in the formal economy.
Mortgage product providers have, however, structured models that come as low-hanging fruits or easy pathways for the youth and operators in the informal economy who represent a very significant proportion of Nigeria’s 200 million population to own homes.
“To address the realities of income volatility, especially among young people and those in the informal sector, flexible mortgage structures are essential,” Adedeji Ajadi, CEO, Mortgage Banking Association of Nigeria (MBAN), reasons.
Ajadi, who spoke in an interview with the media, noted that traditional fixed-payment loans often fail to reflect the income dynamics of many Nigerians, thereby excluding a significant portion of the population from formal housing finance.
He reasoned further that innovative mortgage models can offer a more inclusive path to homeownership, pointing out “the step-up mortgage”, which begins with lower monthly payments that gradually increase as the borrower’s income grows.
“This is particularly suitable for early-career professionals or entrepreneurs whose earnings are likely to rise over time. Income-linked repayments offer another adaptive solution. Rather than fixed amounts, repayments are tied to a verified percentage of the borrower’s income, ensuring affordability even during periods of low earnings,” he explained.
This model, according to him, promotes financial resilience and reduces the likelihood of defaults, adding that hybrid rent-to-own schemes also provide a valuable bridge to ownership.
These arrangements allow individuals to begin as tenants and transition to homeowners once their income stabilises. This flexibility lowers the entry barrier and allows households to build equity gradually.
Another path, he said, is shared equity financing which goes a step further by introducing institutional co-investors who contribute a portion of the home’s cost. In return, they share in the future appreciation of the property. This approach significantly reduces the upfront financial burden on the buyer and aligns the interests of both parties.
“Together, these flexible mortgage models and risk-mitigation tools offer a powerful framework for expanding access to homeownership in a way that reflects Nigeria’s economic realities and income diversity.
Speaking to the informal economy, Ajadi said that to build an inclusive mortgage system, models must reflect the unique financial realities of informal earners, who represent a significant portion of Nigeria’s workforce, about 85 percent.
“Traditional mortgage structures, which rely heavily on formal employment records and rigid repayment schedules, often exclude this demographic. However, alternative approaches can bridge this gap and extend homeownership opportunities to millions currently left behind.
“One of the most promising strategies is the adoption of alternative credit scoring. By leveraging data from mobile money transactions, utility payments, airtime top-ups, and other non-traditional financial behaviours, lenders can assess creditworthiness beyond payslips and bank statements,” he explained.
This strategy opens the door to borrowers in the informal economy who have consistent, albeit irregular, income streams. Flexible repayment terms are equally vital. Informal earners often experience seasonal or fluctuating cash flows, which fixed monthly repayments do not accommodate.
Mortgage products tailored to these patterns, such as quarterly payments, balloon structures, or income-indexed plans, can improve affordability and reduce default risks. Micro-mortgages also present a practical solution. By providing small, manageable loans for incremental building or land acquisition, these instruments align with how many low-income households already approach housing: gradually, and as funds become available.
Additionally, group lending models or cooperative guarantees can mitigate risk and enhance access. By pooling resources or using collective guarantees, members of savings groups, trade associations, or cooperatives can jointly qualify for mortgage financing, sharing responsibility and building community resilience.
